The provision of Article 19 of the Constitution that the people shall have the duty to pay tax in accordance with law means that, in imposing on the people the duty to pay tax and allowing the people tax benefits in the form of exemption and reduction, the State must prescribe by law such constituent elements of taxation as the taxpaying bodies, taxable objects, tax bases, and tax rates. However, it is not feasible for the law to go into all the details, and necessary interpretations by way of administrative orders in relation to detail and technical matters of taxation are not disallowed. Where the competent agency has any doubt about the application of a statute within the scope of its power and issues a directive to interpret the law by virtue of its statutory authority, it is not against the principle of taxation by law and the principle of equal taxation insofar as such interpretation is made in adherence to the relevant principles embodied in the Constitution and in consistence with the general methods of interpretation of law, the legislative purpose of such law and the economic meaning of taxation. (See our holdings in J. Y. Interpretations Nos. 420, 460, 496, 519, 597, 607, 622 and 625). Furthermore, while taxpayers should pay taxes for which they are responsible based on their actual taxpaying ability, it is not disallowed by Article 7 of the Constitution to specify, with reasonable cause, differential treatment by way of exceptions or special provisions within the scope of discretion authorized by law to grant taxpayers of a particular class tax benefits in the form of tax reduction or exemption in order to promote the public interest (See J. Y. Interpretation No. 565).
It is provided in the Constitution, Article 143, Paragraph 3, that “If the value of a piece of land has increased, not through the exertion of labor or the employment of capital, the State shall levy thereon on increment tax, the proceeds of which shall be enjoyed by the people in common.” Thus, the Land Tax Act provides in Article 28, the first sentence, that “in the case of transfer of the ownership to a piece of land of which the price has been assessed, land value increment tax shall be levied on the basis of the total increased price of the land.” However, it is explicitly prescribed by the Constitution in Article 143, Paragraph 4, that in the distribution and readjustment of land the State shall in principle assist self-tilling landowners and persons who make use of the land by themselves. Hence, the Agricultural Development Act, Article 27, as amended on August 1, 1983, provides: “Farmland transferred during the time of its legal use for agricultural purposes to a self-tilling farmer for continued tilling is exempt from payment of the land value increment tax.” In alignment with the statute, the Land Tax Act, Article 39-2, Paragraph 1, as amended on October 30, 1983, provides: “Farmland transferred during the time of its legal use for agricultural purpose to a self-tilling farmer for continued tilling is exempt from payment of the land value increment tax.” It is an incentive in the form of exemption of the land value increment tax accorded to self-tilling farmers in the case of acquisition of farmland and is a measure of tax privilege adopted by the legislators to ensure permanent agricultural development, promote the rational utilization of farmland and adjust the structure of the agricultural industry. Its purpose of tax benefit is very clear and is helpful in achieving the aim intended by Article 143, Paragraph 4, of the Constitution. The differential tax treatment designed by the legislature between the acquisition of farmland by self-tilling farmers and by non-self-tilling persons is justifiable and is reasonably related with the achievement of the legislative purpose, and it is consistent with the principle of equality required by the Constitution.
Where a piece of farmland is transferred during the time of its legal use for agricultural purpose to a person not engaging in self-tilling, but the ownership thereto is registered in the name of a self-tilling farmer, such transfer is not consistent with the legislative purpose of the Land Tax Act, Article 39-2, Paragraph 1, cited above, and is of course taxable for the total amount of value increase of the land at the time of transfer under the Constitution in Article 143, Paragraph 3, and the Land Tax Act, Article 28, the first sentence. The Ministry of Finance Directive No. Tai-Tsai- 821498791 of October 7, 1993, requiring in brief that “if the acquisition of a farmland which is exempt from the land value increment tax is identified to have been made by a third person in the name of a farmer, it is taxable retroactively for the land value increment tax originally exempted for such land” is a specific and explicit administrative regulation of an interpretative nature established by the competent agency by virtue of its power and functions in relation to the provision of the Land Tax Act, Article 39-2, Paragraph 1. The directive, in maintaining that the land which is exempted from the land value increment tax is limited to farmland whose ownership is transferred to a self-tilling farmer, is consistent with the legislative purpose of the above-cited Agricultural Development Act, Article 27, and the Land Tax Act, Article 39-2, Paragraph 1, as well as the agricultural and taxation policies of the State, and has not gone beyond the scope of proper and reasonable taxation to be imposed on the people, nor does it conflict with the principle of clarity of law and the provisions of Article 7 and Article 19 of the Constitution or jeopardize the people’s property right protected under Article 15 of the Constitution.
*Translation by Raymond T. Chu.